Pay off mortgage in full? Or invest?

happymum37

Following a windfall we have 41k in savings and a 26.5k mortgage. 
I'm 40 and hubby 45.
We have a part time police pension (with only 8 years in) and hubby's rubbish aviva workplace pension.
We pay 550 a month mortgage on a 4.75% rate and would finish in 5y6 months. 

Now we have come into dosh would you recommend paying it off or investing? 

kipsterno1

Is this the same £41k you got back in 2020? 

penners324

The ERC on the mortgage may make this a bad idea. How much is it?

You could do a bit of both?

happymum37

penners324 said:

The ERC on the mortgage may make this a bad idea. How much is it?

You could do a bit of both?

We don't have one

happymum37

kipsterno1 said:

Is this the same £41k you got back in 2020? 

No. 
So had saved up to 41k . Then spent 12k on a bathroom.  So my folks gave us the bathroom money so we are back to where we are but with nothing 'major ', on the horizons.. maybe a banger car but a very cheap car

Pat38493

I think more information might be needed to get good feedback e.g. why do you think your husband's workplace pension is rubbish, what are your salaries and is it still 20 years to retirement? (relevant as it could be beneficial to pay the money into the pension matched against earnings)?

Your mortgage interest rate looks pretty high if your mortgage is that small?  When you say "finish in 5y 6 months" do you mean the mortgage will be fully paid off with just the normal monthly payments, or do you mean that your current deal finishes in that time?  Is it an interest only or repayment mortgage etc?

More information would be needed to provide better ideas.

xylophone

Following a windfall we have 41k in savings and a 26.5k mortgage. 
I'm 40 and hubby 45.

You could pay off the mortgage and contribute the monthly amount that would otherwise have used as the mortgage payment to contribute to your husband's pension?

tightauldgit

At that kind of rate I would probably just take the safe option and pay off the mortgage, assuming there's no charges for early repayment? 

A safe investment probably isn't going to pay much if any better than 4.75% and I wouldn't really recommend that a layperson gets involved in more risky investments unless they are prepared to lose a big chunk of what they put in. 

If you really want to invest why not pay off the mortgage and then use the £500 a month you're saving to invest in something on an ongoing basis?

Expotter

Just my opinion, but I'd pay off the mortgage and invest the £550 that I am saving. Ideally into pensions, failing that S&S ISAs.
At the same time, resting easily on the knowledge that whatever happens, no one can throw me out of my home. 

CliveOfIndia

My thoughts, for what it's worth .....

Firstly, are there any penalties if you were to repay your mortgage early?  Usually there will be if you're on a fixed rate, but not if you're on SVR.  If there are any penalties then you'd need to factor this into any decision.

That aside, personally I think I'd pay off the mortgage.  That way, you'll largely remove the nagging worry in most people's minds about "What on earth would we do if we lost our jobs?"  At least you'll always have a roof over your head.

Investing - what do you mean?  The only "safe" way to invest is to stick the money into an interest-paying account somewhere.  But of course, many times your investment will lose value in real terms due to inflation.  At least "investing" in your house will (hopefully!) mitigate that aspect to a large extent.

To make your money work harder and get better returns there are many options.  The "typical" things like investing in the stock market should give you a higher return, but of course it's a gamble, and there's the chance you could lose some or all of your investment.  And these types of investment really need to viewed as long-term investments (10 years as an absolute minimum).

Sticking some of it into your pension is another option - though again, that's obviously a long-term approach.

Anyhow, if it were me, and assuming there's no early-repayment penalty, I'd be tempted to pay off the mortgage.  Then the £550 you currently pay each month to your mortgage, stick that into savings, or pension, or premium bonds, or whatever floats your boat.  You should have quite a nice little nest-egg saved after 5 or 6 years.

happymum37

Pat38493 said:

I think more information might be needed to get good feedback e.g. why do you think your husband's workplace pension is rubbish, what are your salaries and is it still 20 years to retirement? (relevant as it could be beneficial to pay the money into the pension matched against earnings)?

Your mortgage interest rate looks pretty high if your mortgage is that small?  When you say "finish in 5y 6 months" do you mean the mortgage will be fully paid off with just the normal monthly payments, or do you mean that your current deal finishes in that time?  Is it an interest only or repayment mortgage etc?

More information would be needed to provide better ideas.

So I have to retire from the police at 60. Which is 20 years.  Hubby can go in 15 years but will work 20 so we retire at the same time. 

His aviva pension is 3%contribution I think from his employer and thanks to advice on here he now over pays
 He pays 10% now but up until a couple of years ago contributed only 2%.
So in 5 years 6 months the mortgage is paid in full.  We are 0.75% over the base rate and let the mortgage track.  We are not tied in and have no early repayment charge. 

I have rang a friend who is good on finances and he always tells us to pay it off but I'm a bit nervous as we built up savings to 41k to fund house improvements but got a lovely gift off my folks in that they paid for the work